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News and Information Article
Acquisitions Also Slowed Considerably According to Exit Poll Release
NEW YORK, Oct. 3 /-FirstCall/ -- Only eight venture-backed
companies raised $934.2 million through Initial Public Offerings (IPOs) in
the third quarter of 2006 reflecting the slowest quarter since 2003,
according to the Exit Poll report by Thomson Financial and the National
Venture Capital Association (NVCA). This figure represents a significant
decrease from the second quarter of 2006 when nineteen venture-backed
companies went public and raised more than $2 billion. The results continue
to disappoint when comparing the statistics to the same period last year,
when nineteen venture-backed companies went public and raised nearly $1.5
billion. Venture-backed acquisitions reported in the quarter also fell in
volume with 74 companies acquired for a disclosed value of $2.7 billion.
Venture-Backed Liquidity Events by Year/Quarter, 2001-2006
*Total *Average
M&A Disclosed M&A Total Average
Total Deals with M&A Deal **Number Offer IPO Offer
M&A Disclosed Value Size of Amount Amount
Quarter/Year Deals Values ($M) ($M) IPOs ($M) ($M)
2001 353 165 16798.9 101.8 41 3,489.90 85.1
2002 318 152 7916.4 52.1 24 2,473.50 103.1
2003 293 123 7726.1 62.8 29 2,022.70 69.7
2004-1 80 45 3921 87.1 13 2,721.10 209.3
2004-2 89 48 4514.6 94.1 29 2,077.80 71.6
2004-3 87 47 4142.8 88.1 24 3,225.60 134.4
2004-4 84 46 2862.2 62.2 27 2,990.40 110.8
2004 340 186 15440.6 83 93 11,014.90 118.4
2005-1 82 46 4364.9 94.9 10 720.7 72.1
2005-2 80 36 4791 133.1 10 714.1 71.5
2005-3 98 47 4374.8 93.1 19 1,458.10 76.7
2005-4 86 39 2563.7 65.7 17 1,568.10 92.2
2005 346 168 16094.4 95.8 56 4,461.00 79.7
2006-1 104 48 5384.4 112.2 10 540.8 54.1
2006-2 91 37 3747.6 101.3 19 2,011.00 105.8
2006-3 74 34 2758.6 81.1 8 934.2 116.8
2006 269 119 11890.6 99.9 37 3486 92.2
Thomson Financial & National Venture Capital Association
* Only accounts for deals with disclosed values
** Includes all companies with at least one U.S. VC investor that trade on
U.S. exchanges, regardless of domicile.
"The venture-backed IPO volume has fallen to alarmingly low levels,
suggesting that the public markets are not the destination they once were
for emerging growth companies," said Mark Heesen, president of the NVCA.
"The few companies that are going public today are doing so successfully,
which should be encouraging to those in and considering registration.
However, the IPO path remains risky and expensive from a regulatory and
market perspective, and currently there are not enough companies pursuing
this exit strategy to keep the US economy humming."
IPO Activity Highlights
The largest IPO of the third quarter was the $270 million offering from
Mindray Medical International Limited. Based in Shenzen China, the medical
equipment manufacturer priced 20 million ADRs (American Depository
Receipts) at $13.5 a share. Backed by Goldman Sachs, Mindray also posted
the largest first day gains of any venture-backed company that went public
during the quarter, jumping 30% to close at $17.55 a share.
All industry categories experienced steep declines in volume. The
perennial sector leader, Technology raised $480 million in public
offerings, followed closely by the Life Sciences industry which captured
$359 million. The Non-High-Technology sector priced one IPO that accounted
for $95 million.
While the overall volume levels were dismal, the performance of the
third quarter offerings were encouraging. As of September 29, 2006, seven
of the eight venture-backed companies that priced in the quarter were
trading over their initial offering price. For the rolling 12 month period,
58% of the venture-backed companies that went public are currently trading
above their offering price. The statistics also revealed that the average
offering size as well as the average post-offering values were at their
highest levels since the third quarter of 2004.
In addition to the IPOs completed this quarter, there are currently 51
venture-backed companies "in registration" with the United States Securities
and Exchange Commission. These companies have filed with the SEC in 2005 or
2006 and are now preparing for their initial public offerings. This compares
favorably to the 41 companies in registration at the end of the second quarter
of 2006.
Industry Breakdown
Q3 2006
*Number of
Venture-Backed Total Venture-Backed
Industry IPOs in the U.S. Offering Size ($M)
Technology Internet Specific 2 172.8
Computer Software 2 306.71
TOTAL 4 479.51
Life Sciences Medical/Health 2 349.19
Biotechnology 1 10.2
TOTAL 3 359.39
Other Non-high Technology 1 95.31
TOTAL 1 95.31
TOTAL 8 934.21
Thomson Financial & National Venture Capital Association
* Includes all companies with at least one U.S. VC investor that trade
on U.S. exchanges, regardless of domicile
Merger and Acquisition Overview
The third quarter continued the trend of the previous quarter in which
acquisition volume declined. The average disclosed deal size was $99.9
million, a slight decrease from second quarters average, but in line with
the average deal size for third quarter 2005. Median deal size remained
strong in the third quarter, with a median disclosed value of $60.0
million. This compares to a median disclosed deal size of $56.0 million in
the first quarter, and $48.1 million in the second quarter 2006.
"We hope that the lower acquisition volume is a quarterly aberration
and reflective of a slower summer business climate," Heesen remarked. "We
would like to see the number of transactions increase 15-20% next quarter
as investors cannot enjoy the quality rates of return if the two major
paths to liquidity are not open to them."
The Technology sector continued to dominate the venture-backed M&A
landscape with 52 deals and a disclosed value of $1.6 billion. Within
Technology, the Computer Software sector had 17 transactions, followed by
the Internet Specific sector with 13 deals. Fifteen Life Sciences companies
were acquired in the third quarter with a disclosed deal value of $802.7
million.
The largest disclosed deal of the quarter was the deal was the $365
million acquisition of Corus Pharma, Inc., a company that develops
therapeutics to treat severe respiratory diseases, by Gilead Sciences, Inc.
The second largest deal was R2 Technology, which develops analytical software
aids for mammographic screening, being acquired by Hologic, Inc. for 237.1
million.
Venture-Backed M&A Industry Breakdown
Q3 2006
Number of
Venture- Total
Number of Backed M&A Disclosed
Venture- deals with Venture-
Backed M&A a disclosed Backed Deal
Industry deals value Value ($M)
Technology Communications/Media 10 5 231.6
Internet Specific 13 6 452.6
Computer Software 17 7 434.2
Semiconductors 5 3 221.3
Computer Hardware 7 4 301.2
TOTAL 52 25 1640.9
Life Sciences Medical/Health 11 4 700.4
Biotechnology 4 2 102.3
TOTAL 15 6 802.7
Other Non-high Technology 7 3 315
TOTAL 7 3 315
TOTAL 74 34 2758.6
Source: Thomson Financial & National Venture Capital Association
Acquisitions which returned more than 10x the amount of the original
venture investment comprised 21% of the disclosed transactions for the
quarter. At the opposite end of the spectrum, 38% of the disclosed
acquisition deals returned less than the total venture investment. An equal
percentage of deals - 38% returned 1-4x investment for the quarter.
Analysis of Transaction Values versus Amount Invested
Relationship between transaction value and investment Q3 2006
Deals where transaction value is less
than total venture investment 13
Deals where transaction value is 1-4x
total venture investment 13
Deals where transaction value is 4x-
10x total venture investment 1
Deals where transaction value is
greater than 10x venture investment 7
Total Disclosed Deals 34**
Source: Thomson Financial & National Venture Capital Association
** Disclosed deals that did not have a disclosed total investment
amount are not included.
About Thomson Financial
Thomson Financial, with 2005 revenues of US$1.9 billion, is a provider
of information and technology solutions to the worldwide financial
community. Through the widest range of products and services in the
industry, Thomson Financial helps clients in more than 70 countries make
better decisions, be more productive and achieve superior results. Thomson
Financial is part of The Thomson Corporation (http://www.thomson.com), a
global leader in providing integrated information solutions to more than 20
million business and professional customers in the fields of law, tax,
accounting, financial services, higher education, reference information,
corporate e-learning and assessment, scientific research and healthcare.
With revenues of US$8.50 billion, The Thomson Corporation lists its common
shares on the New York and Toronto stock exchanges (NYSE: TOC; TSX: TOC).
The National Venture Capital Association (NVCA) represents
approximately 480 venture capital and private equity firms. NVCAs mission
is to foster greater understanding of the importance of venture capital to
the U.S. economy, and support entrepreneurial activity and innovation.
According to a 2004 Global Insight study, venture-backed companies
accounted for 10.1 million jobs and $1.8 trillion in revenue in the United
States in 2003. The NVCA represents the public policy interests of the
venture capital community, strives to maintain high professional standards,
provides reliable industry data, sponsors professional development, and
facilitates interaction among its members. For more information about the
NVCA, please visit http://www.nvca.org.
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